First-time buyers must act NOW to save £15k on property purchase – cheapest places to get on the ladder
THOUSANDS of first-time buyers have been warned to act now to save up to £15,000 in Stamp Duty.
The amount you can spend on a property before incurring Stamp Duty will fall on March 31 2025, penalising thousands of would-be homeowners.
Stamp Duty is a tax you may have to pay if you buy a home in England or Northern Ireland that is worth more than a certain price.
For most homeowners this is above £250,000.
But the amount that a first-time buyer could spend was increased to £425,000 in the September 2022 mini-budget.
First-time buyers also benefit from a further discounted rate on property purchases of up to £625,000.
From April these thresholds will plummet.
Properties with a value of up to £300,000 will not incur a Stamp Duty charge, while the reduced rate will only apply to homes worth up to £500,000.
The changes will mean that someone buying a property worth £425,000 would currently pay no Stamp Duty but from April will owe the taxman £6,250.
But in some areas of London first-time buyers could be slapped with tax bills which are £15,000 higher than before once the thresholds are slashed.
Should I act now?
It usually takes around 25 weeks from listing a property to completing a sale, according to property website Zoopla, which means buyers have limited time to beat the deadline.
David Hollingworth, of mortgage broker L&C, said first-time buyers should act now to avoid being penalised.
“First time buyers wanting to be sure that they can take advantage of the elevated Stamp Duty relief before it reverts to the lower levels in March will want to be in the process as soon as possible.”
Although a first-time buyer may be able to move quickly, the person they are buying the property from may be in a transaction chain, he explains.
This is when you want to buy a house but need to wait until your seller buys their next property.
How to get the best deal on your mortgage
IF you're looking for a traditional type of mortgage, getting the best rates depends entirely on what's available at any given time.
There are several ways to land the best deal.
Usually the larger the deposit you have the lower the rate you can get.
If you’re remortgaging and your loan-to-value ratio (LTV) has changed, you’ll get access to better rates than before.
Your LTV will go down if your outstanding mortgage is lower and/or your home’s value is higher.
A change to your credit score or a better salary could also help you access better rates.
And if you’re nearing the end of a fixed deal soon it’s worth looking for new deals now.
You can lock in current deals sometimes up to six months before your current deal ends.
Leaving a fixed deal early will usually come with an early exit fee, so you want to avoid this extra cost.
But depending on the cost and how much you could save by switching versus sticking, it could be worth paying to leave the deal – but compare the costs first.
To find the best deal use a mortgage comparison tool to see what’s available.
You can also go to a mortgage broker who can compare a much larger range of deals for you.
Some will charge an extra fee but there are plenty who give advice for free and get paid only on commission from the lender.
You’ll also need to factor in fees for the mortgage, though some have no fees at all.
You can add the fee – sometimes more than £1,000 – to the cost of the mortgage, but be aware that means you’ll pay interest on it and so will cost more in the long term.
You can use a mortgage calculator to see how much you could borrow.
Remember you’ll have to pass the lender’s strict eligibility criteria too, which will include affordability checks and looking at your credit file.
You may also need to provide documents such as utility bills, proof of benefits, your last three month’s payslips, passports and bank statements.
Buying a property can also take longer than people think as it may take time for an offer to be accepted because of practical issues or completing legal paperwork.
He adds: “Having as long as possible to keep things on track for a March deadline will be important, especially with Christmas on the horizon.”
The festive season frequently brings the property market to a standstill which can slow the process of buying a house and push completion dates into the New Year.
Incentives such as Stamp Duty “holidays” can also create a cliff edge deadline, which can create a busier period in the property market as buyers rush to complete their purchases.
But there may be hope for buyers who have not yet started the process.
The Chancellor could unveil plans to extend the policy in the Budget on October 31, which would give buyers more chance to complete their purchase.
The last Stamp Duty holiday was extended for three months in order to allow buyers to complete on their purchase if they were stuck in a housing chain.
The holiday had been introduced to help keep the property market afloat during the pandemic after thousands of property transactions fell through.
It was extended after calls from home buyers and experts to allow more time to finalise property sales.
Where are the cheapest areas to buy?
The average price of a first-time buyer property can vary substantially depending on where you live.
Hull is the cheapest area in the UK to purchase a home for the first-time.
A typical first property in the area is worth £114,300, more than half of the average sold price of a home in the UK, which is £328,457 according to Zoopla.
Sunderland comes in second place at £122,600 for an average first home.
Meanwhile, Burnley and Dundee were also ranked as affordable areas, coming in third and fourth place respectively at £128,800 and £131,700.
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